WPI inflation at 6-month low on cheaper food, fuel

February 16, 2018 — INDOLINK Consulting (es)

Source: The Hindu Business Line, Feb 15, 2018

New Delhi: Wholesale inflation eased to a six-month low in January as food articles including fruits and vegetables as well as fuel became cheaper.Data released on Thursday showed that wholesale price index-based inflation stood at 2.84 per cent in January as against 3.58 per cent in December. It was 4.26 per cent in January 2017.

Inflation based on the WPI food index also decreased from 2.91per cent in December, 2017 to 1.65 per cent in January, 2018.

Wholesale inflation in food articles eased to 3 per cent in January this year from 4.72 per cent in December.

Though inflation in vegetables softened marginally, it still remained high at 40.77 per cent in January as against 56.46 per cent in the previous month.

Wholesale prices of onion witnessed a whopping 193.89 per cent price rise in January, though it was lower than 197.05 per cent in December.

Power, fuel prices halved

Meanwhile, WPI inflation in fuel and power group halved to 4.08 per cent in January from 9.16 per cent in the previous month and prices of all three items –petrol, diesel and LPG declined.

Manufactured commodities were the only item basket to see a rise in inflation in January to 2.78 per cent from 2.61 per cent.

WPI inflation for November has been revised upwards to 4.02 per cent from the provisional estimate of 3.93 per cent released earlier

Data released earlier this week showed that retail inflation was at 5.07 per cent in January, which remains above the Reserve Bank of India’s comfort zone. The WPI is not tracked actively by the RBI but is often considered as an indicator of retail prices.

Analysts attributed the fall in WPI inflation to a dip in food inflation and the impact of the base effect on fuel and power group.

“The wedge between the two indices may persist in the next few months, despite the prospect of commodity prices remaining high,” said Aditi Nayar, Principal Economist at ICRA.

Noting that there could be an upside risk to inflation in February and March due to possible lower rabi output and rise in global commodity and crude oil prices, CARE Ratings said it will have no bearing on RBI stance on inflation and interest rates.“We expect wholesale inflation to be around 2.5-3 per cent for the remainder of the fiscal with a strong high base effect,” it said.

In its policy review last week, the RBI left the repo rate unchanged at six per cent and pegged retail inflation at 5.1 per cent in this quarter.